Overnight Highlights from County Hedging's Tregg Cronin 6-11-12

Below are Overnight Highlights from Country Hedging's Tregg Cronin.

Outside Markets: Dollar Index down 0.322 at 82.178; NYMEX-WTI up $0.87 at $84.98; Brent Crude up $0.86 at $100.33; Heating Oil up $0.0235 at $2.6956; Gold up $0.30 at $1590.40; Copper up $0.0625 at $3.3460; All major currencies are firmer; Softs are all higher; S&P’s are up 6.00 at 1334.75, Dow futures are up 61.00 at 12,636.00 and Treasuries are slightly weaker.  Worth noting, Dow futures were up as high as 91, and most everything is hitting their lows as I write at 6:30.

The big news of the weekend, and what helped most financial markets to gap higher last night, was the news Spain had agreed to seek EU bailout aid to the tune of 125 billion euros to help its ailing banking sector.  In exchange, the EU finance ministers agreed to not attach any new conditions on Madrid other than its current commitments.  This morning’s trade seems to say we realize the bailout will help, but Europe still isn’t fixed.  A story in the WSJ this morning said 100 billion is the size of the bailout, but 368 billion is the size needed to fund itself for the rest of the year.  The data calendar is empty in the US today, so watch breaking news headlines for short-term direction in the outsides.

Rains in the last 24 hours fell in IA/MN/ND with the heaviest amounts around Omaha and W-IA as well as north of the Twin Cities in MN.  Localized areas of 1.0”+ seem to be the heaviest.  The 3-day weekend totals also saw SD and MT receive nice rains, although some damaging hail did fall in NC-SD on Saturday evening causing some localized damage to corn and wheat.  This morning, there is a system tracking across N-MO/E-IA/S-WI/N-IL.  The system is breaking apart somewhat as it moves across IL.  5-day forecasted precip turns fairly dry in the central belt after today’s storm with the most notable precip falling in the eastern Dakotas and most of MN with around 0.50-1.50” expected.  TX-FL should also see a sizable rain event.  Things will be mostly dry the balance of the week in the central corn belt.  Temps will be in the 70’s this week and 80’s and low 90’s by the weekend.  Some riding is expected to produce below average precip in most of the Plains and Midwest with temps around average to below in the east.

After a decent jump at the open last evening, corn prices are falling under modest pressure as new crop corn leads the way lower on the rain event in IA.  While this rain doesn’t say a lot for conditions in IL/IN/OH, “as goes IA so goes the corn belt.”  It should be noted conditions turn much drier the next 10-days following today’s blip, and given corn is beginning to tassel and even silk in S-IL/S-IN, moisture will be critical the next 15-20 days.  Obviously the outside market conditions are playing a role with investor confidence still in shambles.  It is worth noting, however, Friday’s COT report showed large specs net short the corn market (-6,400 caks) for the first time since June of 2010.  Additional length was also pared in Soybeans and meal, and funds are record short soy oil at -53,300 contracts.

Import data from China was released overnight, showing Jan-May soybean imports were 23.43MMT, up 20.7% from a year earlier.  May imports were 5.28MMT, up 16% from a year ago and 8% from April.  Russian wheat prices have been trending higher over the past week, up 3.0-3.5% as the Black Sea Region looks to be dry for the next week with quite warm temps as well.  FC Stone said they estimate the Russian wheat crop at 50MMT.  Otherwise, markets will probably trade a bit cautiously ahead of tomorrow’s June WASDE report.  Corn estimates for old crop averaged 821mbu on corn, 189mbu on soybeans and 753mbu on wheat.  These would all be modest cuts.  There don’t seem to be a lot of people thinking the USDA does anything to corn yield for 12/13 just yet.

Open interest changes during Friday’s session included a drop of 8,515 wheat, 5,484 corn, 74 beans and 750 oil.  Soy meal was up 2,209.  The almost unchanged open interest in soybeans would suggest a decent shift in ownership.  Spreads and basis were mostly firmer on Friday which might suggest specs sold to commercials.  Chinese markets were firmer overnight with soybeans up 16.25c, meal up $8.20, oil up 93c/lb and corn up 3.50c.  Corn basis on Friday was firmer across almost every demand sector, which should keep July well bid at/around $6.00.  Farmers won’t move corn until they can receive prices similar to what they got the last time they sold: $6.30-6.50.  Soybean basis is also firmer, remaining well above delivery equivalence.  Spreads should find support.

Call things a bit mixed to begin with as the rains across S-MN and IA and progressing into the central corn belt are enough to keep the new crop contracts in check, but old crop will find a bid until physical starts moving.  While the crops look good in areas, it is by no means uniform across the belt, and we still have to get to August before we see any new crop bushels.  Wheat feeding is a pipe dream now, and the USDA’s 166bpa yield is also looking a bit lofty.  Crop conditions tonight at 3:00 CDT.

Trade as of 7:05

Corn steady/ 3 lower

Soybeans up 1-5

Wheat up 4-8

Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax
www.countryhedging.com
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